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Kooky
Builder of Shaka, the payment router that pays every agent their commission on closing date.
About Kooky and Shaka →The Property Council of Australia has asked the Federal Government to widen the build-to-rent exemption in its draft negative gearing legislation, in a submission dated 21 August 2026, the day consultation on the draft closed. The industry body argues that the exemption as written would reach only those projects that have opted into a separate Commonwealth tax regime, leaving other purpose-built rental buildings inside rules that were designed for individual landlords.
The submission makes 18 recommendations on the second tranche of the capital gains tax and negative gearing changes. For Queensland, where institutional owners have been opening and planning large rental towers in inner Brisbane, the build-to-rent point is the one with the most direct bearing on what gets built, and it sits alongside a request to lengthen the window in which any new dwelling keeps its tax treatment.
Property Council of Australia, submission on the Capital Gains Tax and Negative Gearing Tranche 2 legislation, 21 August 2026. The 35,000 figure is the Budget forecast as cited in the submission.
What the draft says about build-to-rent
The draft legislation, released by the Treasurer on 4 August, sets out which residential dwellings will remain outside the limits on negative gearing that start on 1 July 2027. Under the main rule, a rental loss on a dwelling bought after 12 May 2026 can no longer be deducted against other income unless the dwelling is new. The draft then lists activities that are exempt from that quarantining altogether, and the Treasury consultation page names affordable housing, housing under the National Disability Insurance Scheme, public housing and build-to-rent developments among them.
According to the Property Council's submission, the build-to-rent item, in proposed section 6(d), exempts the leasing of dwellings in an "active build to rent development". That term is borrowed from the Commonwealth's existing build-to-rent tax incentives in section 43-153 of the Income Tax Assessment Act 1997. To be an active development in that sense, the submission says, an owner has to have formally elected into the incentive regime and to meet its conditions, which include a minimum number of dwellings, offers of five-year leases, ownership by a single entity and an affordable housing component.
Related readTreasury draft gives new homes 24 months to keep negative gearingThe effect, on the Property Council's reading, is that the exemption is not available to a building simply because it is purpose-built, professionally managed rental housing held by one owner. It is available only where the owner has also chosen to enter the federal scheme.
Why the industry calls that too narrow
The submission's twelfth recommendation asks that the exemption apply to genuine build-to-rent developments independently of whether they have elected into, or are eligible for, the Commonwealth regime. It proposes that the existing definition serve as a safe harbour, so that any project inside the federal scheme qualifies automatically, with a second, objective pathway for projects that are plainly build-to-rent and sit outside it.
The argument rests on how these buildings are financed. A build-to-rent tower is held for decades by a fund or an institution, and in its early years the interest on construction debt can exceed the rent. If those losses could be used only against later rent from the same kind of asset, the return to the investor would be lower, and the Property Council contends that fewer projects would proceed. Not every project chooses the federal incentives, because the conditions attached to them do not suit every site or every investor.
The submission pairs this with a point about structure. Its eighth recommendation asks the Government to confirm that a building held on a single title, with no separate lot for each apartment, satisfies the tests in the draft. Many build-to-rent buildings are not strata-titled, since the apartments are never intended to be sold one by one, and the draft's wording on legal interests in a dwelling was written with individually owned homes in mind.
Related readUnlicensed short-stay manager fined: what Queensland owners should checkA further recommendation, the fourteenth, asks that managed investment trusts and similar widely held vehicles be expressly excluded from the negative gearing restrictions. These are the structures through which superannuation funds and overseas institutions usually hold Australian residential property.
The Queensland angle
Build-to-rent is a small but growing part of Queensland's rental supply, concentrated so far in inner Brisbane. A 366-apartment tower opened in Fortitude Valley in June, according to an announcement by its owners, Aware Super and Barings, and the State offers its own concessions to eligible developments.
For the investors behind those projects, the federal draft raises a question the State concessions cannot answer: whether the tax treatment of a building's early losses will depend on an election made under a different law. A project already inside the Commonwealth scheme would be unaffected by the point the Property Council raises. A project outside it, whether because of its size, its lease terms or the way it is owned, would on the draft's wording be treated like any other established rental once the rules begin.
The issue matters to individual investors too, though indirectly. Purpose-built rental towers compete for tenants with the investor-owned apartments around them, and they add to the rental stock at a time when small investors are buying less. The Australian Bureau of Statistics reported on 14 August that the number of new investor home loans in Queensland fell 10.1 per cent in the June quarter. If small investors pull back from established units, the pace at which institutions add rental homes becomes a larger share of the answer to where tenants will live.
Related readBank figures put investors at 35.6 per cent of new home loans in JuneA longer window for new homes
The recommendation with the widest reach concerns every new dwelling. The draft treats a home as new where it is acquired within 24 months of its certificate of occupancy, a period the Government had already doubled from the 12 months proposed in the Budget. The Property Council's fourth recommendation asks for 36 months.
Its fifth goes to the starting point. The submission asks that the period run from the date a dwelling is first lived in, or failing that from a completion trigger that works the same way in every state and separates temporary approvals from final ones. Certification practice is a matter of state building law and differs between jurisdictions, so a federal rule that hangs on one document will not mean quite the same thing everywhere.
Two further recommendations deal with what counts as adding to supply. The draft requires the number of dwellings on the land after development to exceed the number that were there when the owner acquired it. The Property Council wants that replaced with a test applied to the project as a whole, to cope with developments delivered in stages, and it asks for a separate pathway for deep retrofits and substantial redevelopment of existing residential buildings, where a block is rebuilt without a large increase in the count of dwellings.
| Subject | Draft legislation | What the submission asks |
|---|---|---|
| Build-to-rent | Exempt only if elected into the Commonwealth incentive regime | Exempt genuine projects whether or not they have elected |
| Window for a new dwelling | 24 months from certificate of occupancy | 36 months |
| Start of the window | Certificate of occupancy | First residential occupancy, or a nationally workable trigger |
| Adding to supply | More dwellings on the land than at acquisition | A project-based test and a pathway for deep retrofits |
Property Council of Australia submission; the description of the draft is the Property Council's.
Other housing types the submission wants covered
Several recommendations concern housing that does not fit neatly into the draft's categories. The submission asks that new homes in land lease communities, where a resident owns the dwelling and rents the site, be treated the same as other new housing. It asks that purpose-built student accommodation and qualifying co-living developments be added to the exempt activities, with integrity rules to keep hotels and short-stay accommodation out.
Related readFrom 1 July the ATO applies its holiday home test to rental claimsRetirement villages are the subject of a separate submission lodged the same day by the Retirement Living Council, a division of the Property Council. It asks that retirement village accommodation be excluded from the loss-quarantining rules, arguing that the measures would alter the economics of developing and running villages. The council says about 260,000 older Australians live in retirement communities, about 13 per cent of those aged over 75, and that independent living units cost on average 39 per cent less than the median two-bedroom home in the same postcode.
On capital gains, the Property Council takes issue with the formula offered as an alternative to a valuation when an asset is held across 1 July 2027. It works through an example of a development site bought for $60,000 in 2020, with $1.27 million of construction costs added between 2021 and 2025 and a sale for $2 million on 1 July 2028, a gain of $670,000. On the submission's reading, the draft formula would allocate that entire gain to the period after 1 July 2027, because it looks only at the first element of the cost base. The submission asks for a simple days-held method instead.
These are requests, and the draft itself can still change
A submission sets out what one organisation would like amended. Nothing in it alters the exposure draft, and the exposure draft is not yet a bill. The rules that apply from 1 July 2027 will be those Parliament passes.
What the Government has said so far
The Government's position is set out in the Treasurer's release of 4 August. It describes the tranche as resolving complex implementation issues, and it presents the move from 12 to 24 months as a response to builders' need to sell completed stock. The release says a property is generally new where it genuinely adds to housing supply, which is the principle the Property Council's supply recommendations test at the edges.
The Budget papers themselves acknowledged a cost to construction. The submission cites the Budget's forecast of 35,000 fewer homes over 10 years as a result of the tax changes. The Property Council uses the figure to argue that the definitions should be drawn generously where new supply is involved; the Government's case is that the package as a whole shifts investment toward new housing and improves the position of first home buyers.
The final recommendation in the submission asks for a statutory review within two years of commencement, examining the effect on supply, investment, affordability and compliance costs.
What happens next
Consultation closed on 21 August. Treasury will now consider the submissions it received, of which the Property Council's is one, and the Government will decide what, if anything, to change before introducing a bill. No date for that bill has been announced.
The start date for the negative gearing limits remains 1 July 2027. For build-to-rent owners and developers in Queensland, the question to watch is whether the wording of the exemption in the bill that reaches Parliament still ties it to an election under the Commonwealth incentive regime, or stands on its own.
Kooky, from Shaka
Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.
